When it comes to the legal agreements that govern an employer-employee relationship in Australia, there are two primary options: modern awards and enterprise agreements. While these two types of agreements share some similarities, there are also some important differences that employers and employees need to be aware of.
Modern Awards
A modern award is a legal document that outlines the minimum entitlements an employee must receive based on their occupation or industry. These entitlements can include things like minimum wages, penalty rates, overtime pay, and leave entitlements.
Modern awards are created by the Fair Work Commission and are designed to provide a safety net of minimum terms and conditions for employees. There are over 120 different modern awards in Australia, each covering a specific industry or occupation. For example, there is a modern award for the hospitality industry, one for the healthcare industry, and another for the retail industry.
Modern awards apply to all employees in an industry or occupation, regardless of whether they work for a small business or a large corporation. Employers are legally required to comply with the terms of the relevant modern award and cannot offer their employees less than the minimum entitlements set out in the award.
Enterprise Agreements
An enterprise agreement, on the other hand, is a negotiated agreement between an employer and their employees. Enterprise agreements are tailored to the specific needs of a particular business or industry and can include terms and conditions that are above and beyond those contained in a modern award.
Enterprise agreements can cover a wide range of issues, including pay rates, working hours, leave entitlements, and dispute resolution procedures. Unlike modern awards, enterprise agreements are not standardised across an entire industry or occupation and can be unique to a particular business or workplace.
To be valid, an enterprise agreement must be approved by the Fair Work Commission and must provide employees with at least the same minimum entitlements as those contained in the relevant modern award. In some cases, an enterprise agreement may contain more generous provisions than a modern award, which can be a selling point for businesses seeking to attract and retain talented employees.
Which Is Better?
Whether a modern award or an enterprise agreement is better for a particular business or employee will depend on a range of factors, including the size of the business, the industry, and the specific needs of the workplace.
For small businesses with few employees, complying with the terms of a modern award may be simpler and more cost-effective than negotiating an enterprise agreement. However, larger businesses or those operating in highly specialised industries may benefit from the flexibility and customisation offered by an enterprise agreement.
Ultimately, the decision to choose a modern award or an enterprise agreement will depend on the needs of the business and the employees. It is important to seek professional advice and carefully consider the options before entering into any legal agreements that will impact the employer-employee relationship.